Metered Access

Crain's Detroit Business is a metered site. Print and digital subscribers have unlimited access to stories, but registered users are limited to eight stories every 30 days. After viewing three metered stories, you'll be asked to register or log in. After eight more stories in 30 days, you'll be asked to subscribe.

Detroit strikes tentative deal with nonpublic safety retirees

The city of Detroit reached tentative agreements to preserve pensions for retired police officers and firefighters but cut monthly payments for other former employees, key deals that could accelerate the largest public bankruptcy in U.S. history, officials said Tuesday.

Negotiators for the general pension fund, which pays benefits to retirees who didn't work in public safety, agreed to a 4.5 percent cut and the elimination of cost-of-living payments, fund spokeswoman Tina Bassett said.

Despite the cuts, it's a vast improvement over the drastic 26 percent reduction that had been proposed by Detroit Emergency Manager Kevyn Orr, who is guiding the city through the bankruptcy process.

"This was the best possible agreement we could make," Bassett told The Associated Press.

Hours earlier, a group representing retired police and firefighters said it had reached its own deal to preserve pension benefits but slightly trim cost-of-living payments.

Together, the agreements would cover more than 20,000 Detroit retired workers. Those retirees, as well as thousands of active employees who qualify for a future pension, will get an opportunity to vote as creditors in the bankruptcy in the weeks ahead. Judge Steven Rhodes also needs to review the deal as part of Detroit's broader plan to emerge from bankruptcy by fall.

Orr's spokesman, Bill Nowling, declined to comment on the announced deal with the general pension fund.

Both pension deals are contingent on Detroit getting $816 million from foundations, philanthropists and the state of Michigan. Lawmakers still haven't approved the state's $350 million share, which has been endorsed by Gov. Rick Snyder.

The pot of money would prevent the sale of city-owned art and be earmarked solely for retirees who draw benefits from the two pension funds.

The average annual pension for police and fire retirees now is $32,000, while most other retired city workers get $19,000 to $20,000.

"Judge Rhodes will not approve a plan that over-promises," bankruptcy expert Doug Bernstein said. "They are definitely going to have to back up their numbers."

The city last week settled with holders of $388 million in bonds, agreeing to pay 74 cents for each dollar owed. Separately, the judge signed off on an $85 million agreement that releases Detroit from a disastrous debt deal made years ago that carried high rates of interest.